Netel Holding AB

Welcome to Natel Q3 Report for 2026. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO and President Jeanette Ruderskjold and CFO Frederick Hellenius. Please go ahead.

Good morning and welcome to our presentation of our third quarter results. My name is Jeanette Reuterskjöld and I'm president and CEO of Netel. With me, I have as usually Fredrik Helenius, our CFO. During today's presentation, I will start by running through the key developments in the third quarter, as well as information about the announced merger with Infria. I will also give you a market update and highlights from our recent business wins in the quarter. Fredrik will then as usual go through the financials in more detail before I make a short summary and then we open up for your questions. We are well prepared for the merger with Infria with expected completion 4th of November. During the third quarter, we strengthened our financial position and took important steps in the preparations for the new group. It was particularly gratifying to see the strong support for our rights issue, both from existing and new investors. The issue was oversubscribed and together with the over allotment issue, it provided us with 140 million after transaction costs. I see it as a clear confidence in Etel and in the potential of the group we are creating together within Fria. The former decisions have also been put in place. The extraordinary General Meeting in August 21st approved the merger and all relevant authorities have given their approvals. In parallel, we continue to simplify our own organization. The Swedish company's registration office, Bolagsverket, approved the murder of seven Swedish subsidiaries in August. And we will complete the last five subsidiaries in the end of October. It is an important step towards consolidation of our Swedish operations into one operating company for next year, 2027. It will provide us shorter decision making paths, lower overhead costs and more efficient work in areas such as purchasing and product management. The work is part of our cost cutting program, which aims to reduce costs by 15 to 25 million with full effect in next year. We also entered a merger with a positive cash flow from operating activities of 60 million during the quarter and an order backlog of approximately 3.7 billion. Our internal improvements are having an effect and strengthening our starting point for the new group. Together with Infria, we are creating a group with sales of around 5 billion and more than 1,200 employees. Our offering and customer bases complement each other. This gives us better conditions to take on larger and more complex projects, while at the same time gaining capacity for the more smaller assignments. We also see significant opportunities for cost unities. It is with this potential in focus that we are now preparing the next step. If we look at the financial development, we see an improvement in the third quarter with increased sales and strengthened adjusted profitability compared to the same period last year. Sales amounted to 682 million compared to 652 million in the previous year, mainly due to the good development we see in infra services and power. The cost savings that were initiated in the last year are now having an effect. And together with higher product volume, it has improved the profitability. Adjusted EBITDA amounted to 20 million compared to minus 34 million last year, corresponding to an adjusted margin of 2.9%. Our order backlog amounts to approximately 3.7 billion, as I said earlier, and is characterized by good profitability, which gave us a good starting point for continued work forward. We also see an improved cash flow for operating activities, which mounted to 60 million during the quarter. At the same time, we need to be clear about the challenge in telecom. The transformation in the Norwegian market is going faster than we expected and affects our assessment for the full year. We therefore no longer expect any growth for 26, but our assessment of improved margins remains firm. In summary, we see that our actions are paying off, while at the same time we need to adapt our operations and organizations to the changes in the Norwegian telecom market. Now let's move on to some market updates from our divisions. Infraservices is on the way towards increased profitability. Increasing sales and improved results But the winding down of a company continues to weigh on profitability. Sales increased by 26.1% to 169 million compared with 134 million in the previous year. EBITDA improved to minus 2 million from minus 23 million and the margin minus 1.2% from minus 17.5%. The winding down of a company acquired in 2022 still has a negative impact on earnings. But excluding the effects of this company, the EBITDA margin was 1.7% for the division. The process of closing this operation is expected to be largely completed before the end of this year, with only one ongoing project with production under next year, 27. But this shows a positive underlying profitability for infra services in a competitive environment. In power, we see a strong development with growth in both Sweden and Norway, and particularly strong development in the Norwegian operations. Sales increased by 30.1% to 255 million during the quarter. The higher product volumes also contribute to improved earnings. EBITDA amounted to 4 million compared with minus 20 million in the same period last year and the margin landed at 1.7%. Behind the demand is electrification and the energy companies need to strengthen and expand the capacity of the electricity grids. This is also evident in our new contracts, where we have won important contracts in both Sweden and Norway, including with Elvia and E.ON and another large energy company in Sweden. These assignments strengthen our water backlog with 230 million for 2027 and beyond, and include both upgrades of existing stations and new construction. Telecom is undergoing a structural market transition, as we said earlier, particularly in Norway. Sales decreased by 20% to 258 million from 322 million. Traditional customers are moving from large installation volumes in mobile networks to more service and maintenance. The overall volumes are decreasing. This reduces volumes in both Sweden and Norway. In Germany, on the other hand, continued upgrading of older networks and roll-up of fiber is making a positive contribution to sales. Despite the decline in sales, EBITDA improved to 4 million from around zero and the margin to 1.4%. The result provides evidence for the improvement with the cost-cutting programs and good development in Germany. In a business with declining volumes, the cost-reducing measures are increasingly important in order to adapt to changes in the market. In Norway, the change in business direction is brought forward. Lower volumes and tougher competition means that NTEL is broadening its customer base beyond the traditional telecom operators. The focus is more on product operations for public and private customers as well as the defense industry corresponding to the change implemented in Sweden. The profitability in procurement is prioritized over growth. At the same time, Germany provides new business opportunities, and after the end of the quarter, Nettel signed an agreement with a new customer, Saxon Energy, for fiber expansion and laying of electrical cables in Stupen. The project is worth approximately 40 million and is expected to be completed in the spring of 2028. The accelerated Norwegian transition, as we see, is also the reason why the group's growth expectation for the full year 26 has been removed. However, the expectation of improved group margins remains unchanged. This is a forecast for the group, not a separate margin target for Telekom. So, Fredrik, let's move on to our financial performance in more detail.

Thank you. Good morning, everyone. Looking into the financials here in the third quarter of 26, we chased important answers on several objectives. The year-over-year comparison is, of course, reflecting the transition, improving our position since last year's activities. We continuously focus on our capital and our ability to generate cash flows, and we are adapting and planning for a new organizational structure in Sweden, and not at least the ongoing merger together with Infria. In general, the financials in the quarter supports the continuous improvements for Nettel during this last quarter as a standalone company. The net sales in the quarter amounts to 682 million, a growth with 4.5% as we noted good contributions from both the Infraservices and Power divisions. Power in Norway continues to perform well with both ongoing projects and new opportunities. In this particular quarter, we noted further important contributions from Info Services in general and good contributions from the telecom business in Germany during a shift of demand, which puts lights on our ability to adjust during swift market updates. The growth may be a little bit less than previously expected, and we lower our expectation on the growth for the full year 26, whilst we continue to focus on our main objective being improved profitability. And through the order backlog of 3.7 billion, we find support for the continued improvement going forward. The backlog remains around the 3.7 billion from last quarter, with a healthy mix of projects and a relevant duration for the coming periods. In addition, during the start of the fourth quarter, we have added several interesting projects to the backlog as communicated, and as mentioned by Jeanette, for instance, the contributions within power in Norway and in Sweden, and also through the new interesting clients in Germany. The macroclimate and FX markets continue to be somewhat volatile. And with the strength and knock in Euro, we know positive contribution of 3.5% from FX effects in the quarter. And that's approximately 1.7% for the first nine months of 26. The adjusted EBITDA in the quarter amounted to 20 million, a significant upswing from the minus 34 million last year and in line with the previously communicated profitability improvements. The telecom operations in Germany and the power business in Norway continues with strong performances and a strong momentum, increasing our profitability for the group. And we do so in addition to the continuous transition of improving the underlying performance within the core markets of Sweden. The seasonal patterns remain, and through the start of Q3, which was slightly lower than we expected, we showcased a good ability of ramping up production during this time of the year. And we do expect that the fourth quarter will follow our seasonal characteristics ahead of the year-end closing. As we described during the second quarter, especially the intended merger between Fria and the Synergy Realization implied additional costs recognized as non-recurring items here in the third quarter. In total, our adjustments amounted to 24 million in the quarter, of which 11 refer to the ongoing merger process, and approximately 10 million refer to our restructuring activities, achieving scale and cost efficiencies through the full integration of our Swedish operations. The merger between Nutella and Infria will be completed shortly, and so will the costs of this process. And in the next few days, as Conette mentioned, we do expect to complete also the new organizational structure in Sweden. These are relatively greater non-recurring items, obviously, but just as important is the timing and expectations on complete processes during the remaining months of 26. With these fairly higher levels of adjustments, we note a negative EPS of 0.52 in the quarter, but again, we do look forward to the continued development and progress during the remaining part of this year. Before we move on to the operating cash flow in the quarter, I thought it would be helpful also to have a quick look on the completed share issue during September. We are intensely working on the preparations and integrations ahead of the merger between the two companies. And as communicated previously, we announced the intention to complete a share issue in connection with the merger process, further improving the financial position for the combined new group. And we are very pleased to achieve an outcome of 149 million in total, being 140 million net of costs, implying approximately 20 million through the overall allotment allocated to the issuance of new shares in the TEL. With participants amongst existing owners in both Nettel and Infria and additional new investors, we strengthened the ownership structure and support for the company, creating a strong foundation for the future and the upcoming processes and significantly lowers the net debt position here in Q3. The operating cash flow in the third quarter was 60 million. After a relatively intense working capital build-up during the first six months, we managed to leverage on our focus to improve invoicing processes and benefit from the production phase during Q3 and performing above our seasonal expectation. The year-on-year improvement in operating cash flow is good, and we continue to monitor our progress of achieving small improvements in all individual projects, a focus very much driven by our operating teams and ultimately managers in our projects. As of today, we remain with our view that we expect a healthy cash release as we enter the fourth quarter with normal seasonality bringing projects to an end, finalizing production and improving our financial position. Liquidity-wise, the cash flow in the third quarter and completed share issue imply that we have well above 400 million in available funds and we are fully compliant and well in line with our financing agreements. As communicated in connection with the merger within Fria, we have secured a new bridge financing that will be in place upon completion of the process. And we will continue to evaluate additional long-term alternatives for the combined group after having reviewed the bond market here during the third quarter. Looking at the divisions and segment performance, Infraservices reported sales of 169 million in the quarter with a growth of 26.1%. Further implying growth also in the year-to-date period, January through September. We continue to note healthy contributions from both ongoing and newly won projects, but we still need to add additional projects and volumes for both the yield production on our way to improved financial performance and for the start of the next season. This is again a normal state for our infraservices business where we typically have relatively shorter projects and projects with lower volumes being both started and finalized into a year. The EBITDA for infraservices amounts to minus 2 million or minus 1.2%. This includes costs of approximately 3 million in the quarter relating to the continuous process of winding down one company within the infraservices division, which is then adjusted for at group level. Excluding these effects, Infraservices performs relatively well in the light of a transition year and showcased an EBITDA margin of approximately 2% in the quarter or 3% for the nine-month period. The high activity in the market is still to be viewed in the light of high competition, but the need for these services will remain both in the short and in the long term. Going forward, we of course very much look forward to the merger between Antalya and Fria. This is of course holds then for all three divisions, but Infraservices in particular will gain advantages of increased coverage in Sweden, potential cooperation between the upcoming infra and paving segments, and further initiating and increasing the scope of combining our expertise within power, infra, paving and telecom, where the infra competence and production is very visible within most of our projects. Looking at power, we reported sales of 255 million, a growth of more than 30% in the quarter, with an EBITDA of 4 million and 1.7% margin. Coming from important decisions and actions last year, Sweden has been working on this transition, winning new projects and ramping up production, and now delivers 17.2% growth with many finalized processes within the necessary turnaround for the business units focusing on the distribution networks. Norway continued on the growth path from the second quarter with double digit growth to 1.4% growth in the third quarter, leveraging on the momentum and the operational excellence of the company. We continue to win interesting contracts with recent additions within Norway during the quarter and within both countries during the start of the fourth. We do have the 100 million regional network substation in Sweden, for instance. Market activities within Power remain high and we look forward to utilizing on the positive development from the recent contract wins going forward. As said during previous conference calls in 2016, the transformation within the telecom market with our additional or traditional clients and the telecom operators, operators providing lower rollout volumes within both fixed and mobile networks have, as expected, impacted our net sales and profits negatively. Now, however, we noted somewhat faster pace and quicker than expected market transformation in Norway. With these updates, we noted minus 20% growth in total for the division and lower our expectation for the top line of the group for the full year 26 performance. Our team in Germany, however, has successfully been navigating the trends and demand in the German telecom market, and as such delivering a growth of about 25% with continuously healthy margins. In total, telecom generated 258 million in sales in the quarter, with an EBITDA of 4 million and a margin of 1.4%. We continue to work on our cost savings, our direct actions across the Norwegian operations and especially our client diversification across the telecom division as a whole in order to support the transition with improved financials going forward. There is and will be a need for our skilled teams and expertise in Germany for the prolonged rollout of fiber networks and within the Nordics for the industries, for the defense and public sectors and for other parts of the overall telecom markets. All in all, we present our quarter overall in line with our previous comments, normal seasonality. We are really looking forward to the completion of the ongoing processes. But first, thank you very much for the vote. And please go ahead with a few closing comments on the TELS third quarter report.